You Have Been Approaching Loan Repayments ALL WRONG!

In the past, when I started doing this, I was, I could tell you I was really poor at how I tracked these loans. And there's a lot of periods where, you know, to be perfectly blunt, not everything was going so well financially. It's hard to get started in this business and to be successful and to teach people how this concept works. And it, it's not always rosy. It. There are periods of strife and difficulty, and I experienced a great deal of those in the early years. And so because of that, I utilized policy loans for, for many periods of time, you know, to get me through harder periods, times when, you know, I wasn't earning very good income or no income at all. And I needed to still keep the lights on, pay the bills. So policy loans bailed me out of several jams. So how do you go about taking these policy loans? What's this idea of not stealing the peas that I keep hearing about? And what does it mean to make policy loaner payments? And how do I know? Be diligent and follow the good guidance that Nelson Nash set out in his book becoming your own banker so that I can, you know, abide by the rules he has in place by not stealing the piece. So we're going to talk a little bit about that today. I'm going to go over a couple of examples. I'm going to use a personal example to show you about something I've done recently and walk through how we recommend you go about tracking these things so you can be very successful in the implementation of this process called becoming your own banker. The first thing that we're going to look at here is basically just isolating what exactly is not stealing the peas. So Nelson's got several rules. One of the rules is don't steal the peas. It references the grocery store example in Nelson's book. In essence, don't steal the peas means don't take a policy loan unless you've got some kind of a clear path, a plan, preferably a written one. This is where an amortization chart comes into play on how you're going to pay that loan back. In other words, you borrow money against the insurance contract, your cash value continues to rise. If you don't replace some of that, what's going to happen is the loan will also rise. And although things generally still work fairly well in that scenario, if you never put anything back in, you're only working against yourself to some degree. So we want to be intentional about re saving money by paying the policy loans back so the cash value is going up. And the loan is going down. And everything in the middle there in that little spread is. Is money you can access again. So every time you make a payment to a policy loan, that's a payment you can access for something again in the future. Think of it like as an example. You put money into your savings account, it builds up. You take money out of the savings account to go buy winter tires, and that savings account drains down. You have to replenish the savings account so that you can go buy winter tires again two, three years from now. That, that same mindset is what we're doing. We're just using the policy as the engine, the machine by which we're accomplishing that same objective. Okay. It's the equivalent to putting the inventory. You use some inventory from the grocery store, someone's got to go back to the stockroom to where all the warehouse areas, they got to grab, in this case, a canopies, a new canopies, and they got to come and they got to put it on the shelf so they can be used again by another customer. Okay? That's essentially the idea. You have to restock the shelves or else you end up closing the store. If you go to a grocery store and there's the shelves are empty, I mean, that store is going out of business. Well, your store is a warehouse of where you store money. You need to continue replenish it, or else you might go out of business. So this is the premise of what Nelson's talking about. So first we're going to talk about a loan repayment commitment form that we've created and then setting up an amortization. So let's go ahead and we're going to dig into one of these repayment commitment forms, and I'll bring what one up here on the example. And this is actually one that I've done personally for myself and has to do with a loan that I did. Yeah, fairly recently. So very simple. We, we put our name in there. Who's the one that's taking the loan. You know, we've been trained a lot throughout, throughout our history, basically, that when you sign your name to something, you know, think about a real estate contract, you're doing a purchase and sale, or you're setting up a corporation, you're signing a marriage certificate. Like, like these are places where you sign and that your signature is very important. So we're going to utilize that mindset in the purpose of holding yourself accountable to your own commitments. Okay? So here I, Richard Canfield, I make a commitment to repay policy Loan or loans. I wrote down the policy numbers. I changed these numbers for the purpose of my example here. But, you know, here's three policies that I took some loans from and I added it up to one total $18,500. So what am I going to do with that? So we have a few checkboxes that you can use here. It's very generic. You can use this or add comments and details as you see feet. This document for our clients is something that they get to use as they see fit. It's just a guideline, but for me, it's purchasing a couple capital items and. And then a little bit of a vacation. So I wrote a note down here. So I had a bunch of vehicle repairs. I had to get winter tires. I bought a home gymnasium. It's a really cool thing. It's called the Speedience. I'm very excited about it. Peloton. It was a used peloton for my wife. Also very excited about that. Focusing on our health goals. We had a trip planned for our spring vacation that we took. So we had a VRBO cost. We split that cost with another family and. And then some remainder of some flights and stuff from some costs and some things we spent while we were on that trip. So two items, the VRBO and this, this Vegas, you know, trip. These are. This is really one item put together that has to do with a family vacation. So hence, that's why I checked off family purchase. We have a new deck that we built. I had to pay my property taxes. So all these things are being put together in one item. I'm consolidating it basically into one deal rather than taking an individual loan for each one, creating an amortization chart for each one. To me, that seems like a lot of extra work. Doesn't mean that we can't do that and some people will. And there's good, valid learning opportunities in doing that. For me, I just kept it very simple. I said, you know what? This is about what we spent on everything. I'm going to round it up a little. I'm going to take policy loans and I'm going to pay for all these things. I'm paying off Visa and so forth with that, with that capital. So I've already created the amortization chart. I'll show you that in a moment. But this is where we intend to repay. So I intend to repay this loan and replenish my warehouse. I want to put the money back. I'm going to put the peas back on the shelf. Okay. So I Can use that again later. And the payment amount that I worked out was $725. So I'll walk you through that in a second. This payment works out to the same as the interest rate of 12.93%. So sometimes people will say they're going to repay, let's say, at 10%. That's very common. That is something that Nelson Nash suggested. Obviously, interest rates shift and change throughout time. For me, personally, just for me, I'm less concerned about the interest rate. I'm more interested in looking at what is a cash flow payment, either a monthly or quarterly or annual payment. That makes a lot of sense to me that, that, that I can put together. Okay. So in this case, I designed my repayment around that number first, and then I worked out the interest rate after. Okay. Some people say I'm going to repay at 10% and I'm just going to plug it in and I'm going to choose the time frame and boom, there's my amortization. For me, I personally go about it a little bit of a different way. I look at the payment number first. I get clear on that. I make my commitment on that, and then I work out the interest rate after, and I just make sure that it's greater than 10%. So for me, 10% is my minimum. I'm happy to go higher than that, but I choose the interest rate. Okay, but for me, it starts with the payment. Again, this is just my process. So I'm going to return that regularly to a policy. I didn't put the policy number in here, but for me, it's one payment with my bank. So it's going to go to one policy. You may choose to put it into a separate bank account where you store and manage transactions. A lot of people will also do that. And so this is about, like, where's the money coming from? Are you going to do in a lump sum is going to come from cash flow, from an asset, from a sale of a business? Is it from a future event that you're doing? In other words, what's the plan of how you're going to put the money back? So for an example, let's say you're a real estate investor and you're doing a flip project. You're going to borrow $18,500 to fund a flip, and that's for renovations, and that's going to take you, let's say, four months. So maybe your plan is in a lump sum. You're going to repay the money when the flip sells. And you're going to take the profits and you're going to replace what you took, plus a little bit more. So that could be what you write in here. In other words, you customize this based on what's going on in your life. Okay, I sign the document, I date the document. And then we have several reminders and things here again about extra interest, not stealing the P's and so forth. So the idea is to, is to sign this and make that commitment. Now, I save these in a file folder that I have digitally. Some people are very paper oriented. I always recommend, if that is the case for you, that's perfectly good. Make sure that you're working with a system that already works for you and your family. What I love about this, this commitment form, is that it becomes a great place for spouses to be able to have communication sometimes. Let's say we took, we, we bought something or we spent some money on Visa, let's just say. And then two years goes by and we wonder where all the money has gone. And it's because some of it went to Visa and we bought something, but we kind of forgot what it was. When we have a tracking mechanism, if we ever have a conversation like that, and some, sometimes it could bring up, you know, maybe even a little bit of negative energy, some, some headbutting in the household. Well, then we can go to the file folder and we can pull it out and say, oh, yeah, right. Hey, we bought that home gym. We had to get winter tires. We had that trip to Vegas. Like, we had all these things that we took care of. We created a plan of repayment. That's what's happening here. And then you can communicate really effectively with your spouse because there's a, there's a plan in place and it makes sense. So that signed commitment is there. And if you need to modify it, that's fine. You have permission as the banker controlling this process in your life to readjust what you've done. But you better make sure that you document or at least recommit to something new if your cash flow changes. And in my circumstance, I have a $725 payment. Let's say I, I'm not able to continue making that payment. Maybe I have to drop it in down to $300 a month. Let's just say something changed in my life. Okay, well, I need, I better go look at the amortization, see where I'm at, grab that balance and reset it and say, okay, it's going to take me longer to repay this I'm going to drop the payment down to 300amonth. I got to spread it out over a longer time frame because I made a commitment to repay a certain amount of money. I better fulfill my commitment. If I don't fulfill that commitment, I'm not being an honest banker. And that's what Nelson's trying to teach us. So the more that we're intentional about how we're saving capital and where we're directing that capital, the more capital we end up retaining for utilization. And it's not finding ways to disappear in our financial life. It's being very focused and hone honed in so that you have more utilization of that capital because of your being very intentional, essentially, is what that means. Okay, so let's take a look at the amortization that we're going to do and I'm going to walk you through where, where I get this amortization. So here is the, is the sample of my amortization that I did for this particular loan. And we'll, you know, walk you through again. Where did I get this? So this is a loan amortization schedule. It's very simple. It's a free template provided by vertex42.com the link is right here. We'll, I'll put that in the resources. I like these ones. There's, you can Google lots of loan calculators. There's lots of free calculators that produce an amortization. What I really appreciate about this one is I think these guys provide a great service. They have a lot of advertising on their website. They have to pay for their site and what they do. But these templates are free. So shout out to Vertex 42 for doing a great job. Really appreciate it. Beautiful templates. What's nice about this is that it's very customizable. You know, you can add a text box to make notes about what you're doing or make a comment like, you know, I always make a comment about what this loan is for and roughly the date. What I also appreciate is that you can change the payment date. So you can select what the first payment date's going to be. And then in your amortization, of course you can see those dates. So I can see the payment due, the date it's due. If I wanted to add an additional payment, let's say in month 12, hey, I have a tax refund and I'm going to put that in here. I can make an adjustment to that right away if I choose. So these are things that I really Appreciate. So I can save this template into a file folder. So I'm tracking what I'm doing for this specific, you know, purpose, this specific loan. And if I ever need to modify it in the future, I already have the method to modify it right away. I have notes right here about what I'm doing. What is this for? It's all dialed in, everything that I mentioned in the loan repayment commitment form. And for me, again, I started this saying, okay, I've got $18,500. I knew I was looking for a monthly payment of 725 bucks. So I thought to myself, well, hey, if I did it at 10%.

If over two and a half years, well, that's only a 700 payment. Well, what if I did it over two years? I did over two years. That's 853. Well, that's more than what I'm looking to do. What if, you know, so if I did it over three years, okay, well, that's, that's a lower. So I just kept adjusting these numbers to, to get them in a zone where I felt comfortable with the number. 11% wasn't enough. 12% wasn't quite enough. 13% was a little too high. It's super close though. That's almost on target with what I was looking for. You know what I kind of really wanted that I could just leave it there or I wanted it a little bit closer to the 725. 12.95. Oops, wrong number. Let's try that again. 12.95. Okay, so not quite there. Pretty close. 12.93.

And we're, we're pretty much in the zone right there. Right. So the reality is it's a, you know, it's. You can get a little into the weeds a little bit here, but it's a little bit higher than that. It's a rate around 12.94. So I chose to do it that way. That's what works for me because I really want to get clear. I want to be able to set up one payment for multiple things or get really clear on a simple payment number. I like payments that are even to the $100 level or the thousand dollar level or, you know, to 25 or 50. So an 850 payment, a 300 payment. I like payments that are nice and simple and clean like that, because when I see them come out of my bank account, I can recognize pretty quickly. Okay, well, that's a pretty clean number. Like, I probably chose that number. You know, for me, that's just Helpful. So everyone can choose to do it their own way. If we wanted to go ahead and leave it at 10% and do it over two years, no problem. You could set up a payment of 853.68amonth. That works. I just chose to do it differently. Okay, so the reason I'm showing all this is I want you to recognize that you are in the driver's seat, you are in the control position. We make the commitment, we set it up. You set it up the way that you want. Make sure that you're repaying the amount of money that you took at minimum and that you're paying greater than the interest rate of the life company. My recommendation is it's at least 4% greater. All that means is that you're going to be forcibly saving more money and you're going to be paying the loan down faster while the, while the cash is growing up. So you're creating accessibility for the next thing in life that you want to do. Okay, so there you go. And then you print this amortization and. Or you save it as a PDF and you have it available to you. So that's a little bit about how we build these amortizations. Now I want to just quickly highlight again where you can kind of get these, these, these.

Amortizations from lots of different places for it. So I know you can do a Google search and you can find a whole bunch of them. You know, mortgage calculators, etc. Mortgages in Canada are versus in the United States. United States there are monthly compound periods. In Canada they're compounded semi annually. So you do need a different amortization calculator if you're going to do that again. I like, I personally like the vertex ones. I've been using them for years. I appreciate that they're free. So I'm just here on their site right now and you can click on the Excel or the Google Sheet document. You will notice again, like I say, lots of advertising. So good for them. They're finding ways to monetize their site for offering great free tools. If I click on this probabilities, there's an ad that's going to pop up. It didn't happen this time, but often that is the case. And then it gives me the option to download it right here. So they have lots of tutorials, they have lots of really interesting templates on their site. So again, I appreciate the work that they do now then they also have this loan amortization schedule. That's the one I Just showed you. Both of these are good. There's a reason I like having this Canadian mortgage one and I'll show you that just briefly for me, there's something specific about it that I find very, very helpful. So what I appreciate about this mortgage calculator one is it allows you to adjust or manipulate a couple of additional numbers I find very helpful. I use this often when I'm working with real estate investors or even first time home buyers that are just learning about mortgage amortizations. I think it's very helpful to understand and look at amortizations to know what's really going on. So here they do have several other items like down payments, CMHC, etc. You know, I personally don't worry about these. It's not necessary for what we're doing here. But, but here you can adjust the compound period. So you can choose monthly, quarterly, annually or semi annually. So if you want to do a regular normal loan, you can just choose monthly compound period and you can do a normal loan. So you know, the fact that you can make that adjustment to me is very helpful. So I'll go ahead and leave this at monthly. And in the same situation we've got 18,500. So similar to the loan that I showed earlier, you want to check the amortization period. So in my case 2.5 years is what we chose. And the payment I was looking for was 725, so I believe that was 12.94%.

Something to that effect right in that zone. So it's a little bit adjust. Oh, here we go. So the payment number is this. They have some stuff for property taxes and homeowners association fees. I'm just going to delete those. They're not necessary. So the payment amount is pretty much bang on with what I looked at before. Again, you can adjust the, the starting date of the loan so that your amortization reflects that. One thing I like about this is you could show in this calculator, hey, what if I made an extra payment of $50 a month every single month? What is the impact of that? Okay, well it reduces from two and a half years down to 2.33 years. It changes it to 28 payments and the, you know, the last payment date and the total quote unquote interest savings. So there's things that you can adjust here. Again they have a space to put additional payments. You may decide at one point in time, you know what, I sold a piece of real estate. I sold some stuff on Craigslist. You know, whatever, whatever that is, or my wife got a raise and we have a little bit of extra money. You know what, I'm just going to go ahead and I'm going to fulfill my commitment and I'm going to pay off the remaining amount of that loan. So what you would do is you would look at the balance of the loan and you would say, you know what, I'm just going to pay the rest of that, you know, to take care of it and eliminate that loan and I'm going to do a lump sum payment. But the amount I'm repaying is what the total commitment is. So you don't go and log in and look at the insurance company and see what's left owing on the policy loan and you look at your amortization and you see what your commitment is. Nelson Nash taught us to follow through on your commitment, finish your loan schedule is what he used to say. So if you've made a commitment that you're going to repay a certain amount of capital and this is how much is owing on your commitment, that's the amount that you send back in. So that's where you're holding yourself accountable to becoming your own banker. Okay, so again, these are great tools. They're very easy to use and we know we'll provide some links to them. Uh, I find these as very helpful, very simple way to create and track your amortization or managing your money. So with that in mind, let's, you know, just go back to the guide that I had. So I want to talk a little bit about again, saving your work so you can print these. Some people are good with physical documents, putting them on the wall, pasting them up. I know for my wife, she doesn't like to see stuff pasted on the wall a whole lot because I tend to make a mess when it comes to that. So sometimes I put them behind a cupboard door where, you know, if we have guests over, they don't see a random amortization shirt on the, on the wall. But what I find works really well for me is a digital folder like a Dropbox or, you know, something of that effect or a Google Drive or whatever that you might use. I like it so that it's something that my wife could access if she needs to, like. Unlikely that that'll be the case, but it's available at least that way. And I usually like to have it in a, you know, I have like a policy loan folder because we have lots of policies. Sometimes you're making a loan request from more than one policy. But that's going to one item like I showed you in my example. So I want to make sure that I'm being mindful of that and I can track everything very effectively. Now in the past when I started doing this, I was, I could tell you I was really poor at how I tracked these loans. And there's a lot of periods where, you know, to be perfectly blunt, not everything was going so well financially. It's hard to get started in this business and to be successful and to teach people how this concept works. And it, it's not always rosy. It. There are periods of strife and, and difficulty and I experienced a great deal those in the early years. And so because of that, I utilized policy loans for, for many periods of time, you know, to get me through harder periods, times when, you know, I wasn't earning very good income or no income at all times, and I needed to still keep the lights on, pay the bills. So policy loans bailed me out of several jams. Now because of that, I was less intentional about how I was repaying policy loans. I was committed. I knew that I would repay them and that I. But I didn't have a very good plan in place because things were happening, you know, almost too fast, a little bit at least. I felt that that was the case. So that's on me. But it doesn't mean that today I can't go back and actually replenish those things I did in the past. So quite recently, actually, I took some policy loans. This is, you know, maybe about a year and a half or two years ago, I didn't take new loans. I set up a new amortization to repay loans from the past that I hadn't really been clear and concise about. Okay, there's no reason that I can't do it much later. And the, the specific example that I'm referencing is, you know, when my daughter was, was being born, when my wife was pregnant, we had several challenges and complications during that pregnancy was a very stressful time in our life. And because of it, and we had a young son who was, you know, under 12 months old and, you know, very, you know, needy as young children are, especially for their, for their mother. There was some restrictions, a little bit of bed rest stuff. So, so it created a lot of challenges for us household wise. And then because of that, you know, financially, because it was difficult to run the business, have meetings with clients while there's all these other competing things pulling at you. So, so the end result is for many, many months it was a very difficult financial time from an income perspective, and that's just the way that it was. So thankfully, we had been capitalizing and we were building up saved, accessible values in, in policies that we were able to utilize over that period of time. One thing I always did commit to was I committed to the premium. And because of that, that's what created capacity for us to get through those lean, hard periods. But the result was we, we used a lot of policy loans, and then it wasn't until things started to roll again and we were able to start, you know, just like imagine you got laid off from work and you were laid off for a year, and then you get back to a great new position. Well, now you got to go back and pay off credit cards and pay down the things that you were using to get through those lean times. Policy loans are no different. So the issue was I wasn't very good at tracking things at that time. So I look back and I, and I put a little thought into it. I didn't go through and look at old documents. I just, I just thought about it very clearly and I said, you know, there's roughly about $40,000 worth of, of loans and overall things that I probably need to repay from that one period. And so I set up a new amortization. I stretched it out over. I don't remember the period of time, but I believe it worked out to think it's a $2,000 a month payment, something like that. So it might be over three or four years. Again, I don't recall. I could pull it up if I wanted to. But the end result is I, I made a commitment to go back, you know, from five years previous, essentially from, from loans that had taken place that I had never put back. It wasn't know, my opinion. It didn't feel like I was stealing the peas, maybe to a degree. It's just that I hadn't been able to get to a point where I was able to really start, you know, plugging away at, at those properly. So because of that, there was a good period of time, and now I'm making that commitment to replenish those. So I am returning the peas on the shelf, but the shelves were bare for that point. That, that type of capital I was working with for several years. Okay, so these things do happen, you know, And I remember having an interview with NELSON Back in 2017, a couple years before he passed away, you know, and I asked him about, you know, what do people do in hard times? He's like, well, Isn't that one of the things that policy loans are for? When times are, when times are bad, use them. When times are good, put the money back. That's basically the summary of what he said. So we, we've been actively proactively working towards making that a reality in our life. So there you go. There's some couple of examples for you about using this. So in summary, use a loan repayment commitment of some kind. If it's just the amortization that's your commitment and you sign it, great. In my opinion, you should be signing on the document or signing on something so that it creates that mental connection to the commitment that you're making. There's no one else that knows about this commitment other than you and maybe your spouse or maybe a business partner. So when you have an accountability person and you can even use your, your infinite banking coach as someone who can be that accountability person for you by being good communicator with them, I mean, they're there to help support you. But don't rely on them to do everything for you. That is not their responsibility. It's your responsibility as the banker to do for you work with the tools and the resources you have. That includes people resources to help you be accountable to the commitments that you make. That goes for a lot of things in life. It's not, not unique to this process, but if it works in other areas of life, it certainly can work here also. So that's why we work with the things that Nelson taught us to do. So there you go. That's how you create a loan amortization. That's how you track it. That's how you make a commitment and that's how you put this process into motion when you begin taking and using policy loans for the things that you're going to be putting your money to work on. Anyway, hope you enjoyed this. Hey, if you like our great content, make sure to check out some more. Boom. Another video just popped up right there. Take a look.